NZ Herald 11 October 2008

APerhaps because the market is so competitive, KiwiSaver providers tend to be pretty flexible. A survey of some of the big providers, including Tower, finds that they will let you:

• Switch your future contributions to a new fund, but leave earlier contributions where they are if you wish.
• Move some or all of the money already in your account to a different fund.

One exception is AMP, which goes along with this unless you are in the AMP default fund. If you want to move out of that fund, you must move all the money in that account and also pay future contributions to the fund you move to.

You can get more info and forms from your provider’s website or by ringing them.

If other readers find their provider is not that flexible — or has only the one fund — they can always move provider. All you have to do is contact your new provider, who will arrange the move for you.

Most providers don’t have a set-up in which you could, for example, arrange to move quarter of your money now, a quarter in six months, a quarter in 12 months and a quarter in 18 months. You would have to take the initiative to make the move each time.

But that shouldn’t be difficult, and if you do want to move out of a riskier fund it’s worth it to spread your exit over a year or two, so that you don’t find you have moved the whole lot right at the bottom of the market — whenever that turns out to be.

In most cases, providers don’t charge a fee if you switch funds, although some limit this to one or two free switches a year.

I would hate all this to leave the impression that I’m recommending moving out of a KiwiSaver fund or any other investments with considerable share holdings and perhaps also property holdings.

Their value will almost certainly have fallen lately, but that’s actually a good reason to invest in such funds, rather than the reverse. You’ll be buying at what may turn out to be pretty cheap prices in the long run, although nobody can be sure.

Strengthening the “buy now” argument is the issue of rebalancing. If you decided some time ago that your investments should be, say, half shares and half bonds, the recent plunges in share prices will have tipped the balance in favour of bonds. So you may want to make future investments largely or fully in shares for a while, to get back to roughly 50:50.

In our correspondent’s case, though, it sounds as if it’s time for a change of direction towards more conservative funds. Such a change makes sense if you are getting within, say, ten years of spending the money or if you really can’t cope with volatility.

If you are in the latter group, though, promise yourself you won’t move back into riskier investments when the markets improve. Moving back and forth is a loser’s game as most people, even the experts, often get the timing wrong.

AYour argument would be stronger if you had overpaid tax. But given that the KiwiSaver tax credit is a government gift to you, you might be accused of looking a gift horse in the mouth.

Nonetheless, the tax credit was part of the deal when you joined KiwiSaver, and a six-month delay does seem too long — if, in fact, it were a six-month delay. It’s actually only three months.

The KiwiSaver tax credit year doesn’t end on March 31, as you have assumed, but on June 30.

Any time after that date, each provider sends to Inland Revenue a list of how much each of its members contributed during the year ending June 30, and the date that provider received each member’s first contribution. The starting date is relevant, as the maximum first year tax credit is proportionate to how much of the July-June year each person was in KiwiSaver.

In some cases, Inland Revenue may receive more than one claim for the same person, if that person made additional contributions for the year to June 30 after the provider had sent in the original claim — presumably contributions that were delayed somewhere along the line. Also, some members may have changed providers.

Within 30 working days of receiving the information from scheme providers, Inland Revenue forwards the tax credits to the provider, to be allocated to member accounts.

As of September 20, Inland Revenue had transferred $259.3 million of this money.

It doesn’t have data on the average amount per person. But let’s guess that the average KiwiSaver received a $522 tax credit — half the maximum because on average they joined halfway through the year. If that’s anywhere near accurate, it means about half a million people — of more than 800,000 in the scheme — have so far received their tax credit.

What about the rest? The slowness is not necessarily Inland Revenue’s fault.

“Providers have had to implement new technology systems and test them before lodging claims, so the information has been arriving at Inland Revenue gradually since July,” an Inland Revenue spokesperson says. “Claims from two large providers are still outstanding.” This, of course, delays the crediting of member accounts.

However, the spokesperson expects the system to be much more streamlined next year.

“Members who wish to know whether or not their tax credit claims have been processed can call their scheme provider, or register for MyKiwiSaver at www.kiwisaver.govt.nz,” she adds.